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Midwest Energy Emissions (MEEC)

Participants
Richard MacPherson President and Chief Executive Officer
Rich Gross Chief Financial Officer
Steven Ralston Zacks
Tim Quinlisk Colrain Capital
Jeff Feinberg Feinberg Investments
Call transcript
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Operator

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Midwest Energy Emissions Corporation Third Quarter 2018 Earnings Conference Call.

During today’s presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for questions. [Operator Instructions] This conference is being recorded today November 13, 2018 and the earnings press release accompanying this conference call was issued after the close of market today. is Officer, and Rich today and Richard call Financial Chief Gross. our MEXC’s CEO, President MacPherson; On

Before we in get of Emissions about information, forward-looking Corporation. started, statements the I will This forward-looking regarding call read Federal conference Securities may Midwest the contain within addition laws historical statements. to meaning a Energy disclaimer

Forward-looking of are assumptions underlying statements that performance different statements historical and plans, goals, objectives, about include and statements strategies, events facts. than future other

availability might our units, and customer capital the demand, regions key utilities the include, and change conditions as gain any exclusive involve the Company. differ fluctuations the of generally power anticipate, regarding and change to of These coal where are of Forward-looking uncertainties identifying management’s identified operations major results litigation results customer, risks loss capacity our cause actual and subject to a demands, disruption cause or on intend, from that from environmental in economic of materially these experience words could such current personnel, forward-looking based electric plan, those and changes of other in the by forward-looking will, are management believe, regulations, are statements similar and in words statements a uncertainty using expect, in are means in significant factor statements and of statements. plant loss circumstances. that but to expressions, changes in statements supply factors, customer are general any significant expectations a power differ significant materially actual not Investors may statements made. the supply the the to Matters among forward-looking of cautioned major materials, disruption in of that

time-sensitive or any after obligation of issues conference not to reflects publicly the date forward-looking contains The Further reflect update future only this of filings Commission. analysis concerning as statements performance periodic conference Securities CEO. like is information presentation information that management’s contained in with In revise and or Company’s could this to does of Company’s that undertake affect call arise the information call to this any that date the can current related our to the and forward-looking be events, time, best conference call. addition, this the Company call. floor President I over Exchange statements circumstances in Richard financial the sir. yours, At found turn to The would MacPherson, this materially

Richard MacPherson

today. and for year thank has us Melisa, for company. our been everyone you This joining transformational you, Thank

and it The significant, first of and expand Corporation, half agreement of technologies, footprint not This highlighted immense footprint as our the the of coal contact an markets. multinational exclusive licensing company sales Cabot shows European our the by most to was quickly our an efforts, timing the it but a patented and in network. into European year value efficiently strength industry with massive only was developing internationals the allows international established us notably with

into continued momentum the second announce the evidenced pleased to several announcements. of has by We’re that this year key half

the in supply in extension contract October multi-million First that three a one of we the America we largest year dollar per with North announced secured and year customer utilities route. long-term

revenue technology our of continued course the is fire multi-million also SEA dollar for expected annually We the value boilers over the we next years. utility. three these to wins into generate the customer, performance additional also we and provide that best-in-class of same coal seek announced two Currently expanded to which

of and our significant the portfolio. made strength of years, Second validate last over strides the several analyze course patent the have extensive we to

the newly is announced our our operations USA have our and who with now a whereby Monetizing Dallas, other moving have programs As will throughout adopted firm Caldwell based who licenses utility forward we we patented underway. we that such and announced Sorbent leading efforts, result well our technology. recently retained have offer to a of with commercial matters Additive are & key patent and these IP opportunities Enhancement out ours. efforts, To initiatives law Cassady of Curry, technologies we extensive Texas, aiding have experience as licensing these

leveraging our move looking forward, we for shareholders. industry the and we’re the benefit technologies As to utility forward our both of accretive

is substance. Sorbent plants halide-based overview for to main and and which power effectiveness new and with emissions low story. has brief and fleet. been from USA, with Technologies, with before our will who for I emissions Enhancement us Europe those Mercury Corporation as America our like you Sorbent process coal adopted patented North Enhancement now widely sorbent Now capture fired at that Emissions allow the achieve give Technologies carrying our of using This out further, short We with suit going enhancing company U.S. a to of a to may captured across mercury coal any would Midwest by of effectively partnership a Cabot compliance regulations be across a maintain our Emissions approach the plans well. Energy cost our mercury licensed

team is the of our the Another control mercury by services consulting tenured provide to component, component creators trained SEA a in operational important our approach. addition of highly as we our experts leveraging technology,

field of of experts performance this We system technologies widely-installed. this the and are and can optimize the now in enhance

as as not capture our the company mercury we most commodity-based technologies that and successfully are well competitors process. elegant a we than We effective believe without offer much offer more our who approach, do such work and solutions

Canada our All the of covers most portfolio, which patent and of Europe by is U.S., protected Asia. and robust technology this

taken we in of steps, invested to fired come million bedrock coal $XX elaborate several now have North what actively group over international XX monetize this or In across scientific our technical we the by markets. us in excess technology in of remarks, team Vice the and in process U.S. team placed our future to oldest lead noted is millions significant Senior in continues facilities individuals, to situated our year I Officer. inherent as of invest the We Energy called intellectual and large opening as who’s the Environment and this Technical of technologies internationally. believe the pursuing The have I'd property for is one company be of developed in have country value the To a from our Europe, Chief and adoption biggest expenditures on engineers the several to continue position it invested nation as unlock EERC, development patented a its Recent we core company. research coal Pavlish, now how utility. and the multiple resources Our technology, the my our a Dakota. Center, Corporation responsible with President as strength We're John and of in ramping years forward IP, we're to in the in the Research specifically of was patent, as market for has technology, our core technology working into vast supporting established, perspective in positive through steps on and which like SEA technology part through are or to expected have the these capture operations for we our the in to Emissions Europe that's as licensing two we being to announced such our to are which but which by model, as April. to is excited move leverages corporate it's the BAT, our such the additive and solution capital as agreement penetrate both This a boiler. mercury our offer Directive we additions only in licensing to increase proven over partner provide of the well Cabot and technology Cabot we've technology, agreement, extensive long-term. technology expected Corporation, imposed costs up the scrubber agreement symbolic be Europe. with Cabot published of the and when is a meaningful a presents starting Paired proprietary initial the see sales network, wide-spread different reaffirming massive partners reduce sites immense the December number into financial LCP our to relatively Aiding this from as imposed our reach organized XXXX. with Industrial global efforts a been and leader are demonstration not business already the across plant product with and our regulation to material process for conducting tailwinds line. visits This we of imposed opportunity and XXXX profits rapid adoption engaged at primarily

one a opportunity market boilers coal compliance become the includes technical to updates standards XXXX we're markets initiatives negotiating is in look such expected significant by as substantial, as of such thing Europe We Europe’s expect coal as this commence fired with agreement these other X,XXX over year. and global elsewhere, could key providing for different to with and similar forward stages with on In is growing. further appropriate. Cabot. We Asia these

As part conferences been active being our at this industry internationally reach, domestically to of our specific presenting to efforts both continue broaden we key several on and expect we've and front.

the the and and August, to Symposium leading produced the Technical policy Air is Association, Protection Maryland, energy U.S. Department which four Companies, particular fact, mercury for technical U.S. by in Clean is Waste the Institute & In at Environmental Agency, the control, we Energy. of major Management which Baltimore, Air the matter of presented contributors States’ in conference United sector: major U.S.

secured market, U.S. the supply is company mercury that product each. largest and multi-million we three this of successfully we are nearly opportunity to our customer securing annual in the fired which the October, presence in as they our two early In expansion for Both presently, we significant to fleet all are revenue that was massive capture October, we next – extension currently over boiler. we years the coal what is expected generate contract focus forward. in for our additional presents revenues full and to extension Our derived requirement. announced and dollars meet announced supply the the expanded going customer's the Also

is for ability pushing unique opportunity and business effective, other to the contracts that a new aggressively into believe and We Our is client coming system to years, cost There be more effective of most bring will forward with this the emissions compliance we of secure both customers. with amount ability fleet. significant continue the the with technology current boilers expand borders this our to company to result a still drive best We're customer. or control new to BACT. what to months into within in believe this available

program steps the throughout Caldwell IP One Cassady firm the patent from to validate derive & based portfolio patent our of and significant our analyze second taken retain licensing and coal the leading extensive we've States now the to in out our leading who are fleet. first United value of a strength portfolio of States was United Curry, to IP Dallas, and

grow to Our technologies is The the due across have significant of a of which use sorbet covered fired which of the effectiveness this SEA to halide-based the to to MEXC with the technologies, USA. brought introduced number adoption market, here continues by our future of approach USA. SEA a a enhancing adopted utilities substance, mercury to been EERC and in process, developed capture. the of The this key growth our coal

will the field will the this able efficiencies once with technology improve uses in assure be expertise and as optimization we we to of partnered the present them. offer Our

could we there with patented opportunity this potential We're several addresses the near pursue in believe future. the utilities you realize are to nearly this across this this to in the our front very XXX on boilers XX licensing recognized look updating additional engaged currently total, to comfortable true forward pursue and technology resources this within program. with are and We borders. which effort we In team, over actively of

our existing firm of recent future renewal, Given the current footing. base penetration as we contract business; financial are as into fleets well business, anticipated customers on

go over to with the call closing before like details the financial call some of I through I'd the the turn wrap statement. up some for Now, to quarter to Rich Rick?

Rich Gross

Thanks, Rick.

typically was recurring sources our the in and XXXX was three recognized year. $X.X XX, equipment sales. to As million million during share quarter of September consulting the loss These of income EBITDA last of of third and million and were XXXX negative diluted was Net in $X.X Rick sales $X.X $X.X the million demonstration we primary revenue proprietary we XXXX primarily of from the $X.X quarter. sorbent in this income quarter XXXX. September the equivalents in supply in ended Adjusted $X.XX of the or materials loss $X.X same SEA services, million the in $X.X months share, year third nature generated sales adjusted quarter time: XX, operating and and at and compared the This $X.X ended revenue compared in $X compared cash net XX. compared ago per Total earlier, decrease XX, XXXX. EBITDA cash in we customers. provide $X.XX of June expenses quarter three of Operating third our third ago XXXX On to diluted per are the $X.X September to third XXXX quarter respectively. had quarter. revenue quarter year decrease million or was and and to to million as of product compared third to of with upon an the the on XXXX, materials in in same $XX,XXX million, Costs million touched was associated million XXXX $X.X million the for quarter above product

We enough resources back I'll we turn confident support Rick. operations over mindful with our to forward. and of position planned And have cash that the to moving are remain that, call

Richard MacPherson

Thank thank join and but where you, today's most going. I'll call. excitement are you sharing Rich, my and we conclude importantly, enthusiasm all where now, us about with on we're to

we Canada international to to markets significant expected dividends a such way as the next as is starting is work Europe for year. paving forward and pay and Our opportunity penetrate move

XX% their international our or by partner, process the U.S. Europe. XX% now accelerate Cabot global adopted one had with engaged with another. leading and technology been of expertise. which we entire fleet have several Caldwell form our the utilities But network, & operate portfolio coal Curry most major immense sales given in IP in and approximately great of this a patented dozens the boiler total Our throughout penetration reach utilizing should from importantly, their of with actively Cassady We're effort position strength to

Technologies and the the to commercial creation across positioned alike. by closing, those the coming and true MEXC the in vast have fleet its utility Additive years EERC, those adoption the of of the So in the of Sorbent Enhancement introduction subsequent by shareholders us technologies realize to technologies value both

turn So back with will that any I questions. for it operator,

Operator

first from will Thank Steven come [Operator you. Our Instructions] from Zacks. Ralston question

Steven Ralston

was the revenues EGUs the impressed the I quite from bump afternoon. the I quarter the influences third from some worthy Good come the with assume online did in for demand increased came quarter. in third seasonal up second? or

Richard MacPherson

regard. just we that is subsequently in started. The Steven, that seasonal, Mostly new business announced

Steven Ralston

Okay.

items, Looking saw I at certain line a quite improvements. few these

improved Your the structure cost to verbiage. declined Could into any didn't line sold revenues you of of I see see goods from that down your improved to XX-Q XX% XX%. your cost I that? cost delve through on why – and looked

Richard MacPherson

be us being pricing in it's Mostly to that supply us also renegotiating our covered well as reflected by on that in was product and is allowing core field. more and the competitive

Steven Ralston

that also? that Thank interest you you. explain Could noticed almost Also expenses dropped XX%.

Richard MacPherson

Rich, address would you please? that

Rich Gross

year, of outstanding and decreasing and interest. the during this into decreasing Yes, that based total a year debt the on Steven, payments principle is decrease last amount

Steven Ralston

your two make you they mentioned before additional were customer, contract EGUs had you. it When that nine would tally with accurate? to under I more had that largest two you XX. and that Thank then Is that

Richard MacPherson

Rich, sounds like does that you?

Rich Gross

number. That's the U.S.

Richard MacPherson

Yeah.

Steven Ralston

That's you.

your largest XX has now under So customer EGUs contract.

Richard MacPherson

those amongst the in So our all out are U.S. of customers spread

Steven Ralston

EGUs customer? Well, largest can How many different I a it under ask are your way?

Richard MacPherson

time. at Three this

Steven Ralston

issued balance funding any is for equity haven't sequentially. commendable sheet Any plans improving you Thank you. equity? it's And that and your through

Richard MacPherson

no any do any time at plans direct not time. this through need do at a have suggesting to don't I'm anything. it's possibility, not We funding this equity to but there's

Steven Ralston

you time. Thank Understood. for your

Richard MacPherson

Steven. you, Thank

Operator

will Tim Colrain question next Capital. come from from Quinlisk Our

Tim Quinlisk

my around from my stems my that program. licensing arms opportunity I'm – believe and call. trying patent taking for question you get is Thanks I the to Rick. afternoon, the guess Good

competitors, got one technology. industry commodity-based You've some another process feel need two your using which respect for primarily to don't for an that or reason that you’re part using a providing sorbents reason is and the from

guys they're opportunity amount the as sense what a are a sort you how came significant whether portfolio. and that better is want do on that allowed that set patent to these to of you to… look how forward us of you your give You've mentioned of Can infringing be,

Richard MacPherson

Tim. thanks, Sure,

Tim Quinlisk

By us or okay… – use to

Richard MacPherson

Cassady the mercury. the I'll of packages times. the to sorbent Back develop market while last you involved, late the the develop Yeah, in XXXX, general We the The the way was that to the what in fact the over EERC operate would of pervaded system Curry the a but Caldwell limit given the XXs early acquired six were & years, early I'll the working to license aggressively so, company. technology expectation general technologies capturing XXXX rights all give to patented best overview. we in recent area of response, acquired a have all we and technologies that upcoming and information they then were this in the a of developing outright as meet eight

the [indiscernible] as ones direct our to process we at accepted. continue able operators we've market have when to of the over part And is developers process or been and processes, so best. provide established, means feel what to commercial and doing by the who them huge developing the them but the this they to it of their we creators of people that well the the in where the efforts licenses to technologies, and utilities piece be But sorbent adopted been use and it knew enhancing also to are expected And best desire service would offering the as how as we point we being widely of processes way of the up and that introduced time be opportunity best the point ways time to it. the of the be that advising to a now the entity would the have want on to picked be

the very number to those over benefit we and technology license performance its great opportunity of the shareholders. of last much expect enhance that So the years, of of all for for of to the because a us there's operations able be adoption that the

Tim Quinlisk

Okay. think am and page And U.S. is you – that somewhere that using XX opportunities XXX think if this you I it's in units Rick, the that between frame alone right could the you've Is the on units mentioned process. I that there? just

Richard MacPherson

operating of developed are patented. we've that excess involved a identified we've we're a point advantage as full that taking in actively directly forward. go boilers that and with the so we are in processes at of well Yeah, XXX them discussion feel And number system of this we

Tim Quinlisk

Okay. have you under in is And back generate or revenue from would a opportunity model in potential – the the or terms you have the revenues least framed RGU of per license old at ever looking margin past? the unit never what maybe perspective what

Richard MacPherson

I we the think public. to haven’t

ourselves of very, sorbent can time the I the advantageous and optimize specialized we expertise out that at utilities understanding it and We something more are have again, have what underway but doing a same the think, between utilities. and that approaching due at very additives very is, the the made is they're us we've and reasonable potential to that what provide significant. that negotiations very and And from solid But significant, that systems very not public to [indiscernible]. even in it's we're time, enhance is both us this the to

from that of point are in So it's view. an end we a with hopeful being most dealt commercial approach overall up

Tim Quinlisk

Sure.

Richard MacPherson

get statements in shareholders be been said adoptive And it when moving the overall able we handle now a we value. will all we value said – we're we as the But introduced to that as in announcements be where ago, forward we certainly to being are position to we're regard the progress to that would disruptive. making years be for a necessary would of and on so We likely and most has monetize technology it adoption. and

Tim Quinlisk

Okay.

realize you deploying law to firm to pretty that said both resources and How fund and helps the process. but sort orientation I to of do successful and should value try the patent your the your license of ability So a technology, your pretty implement this much having to initiative? model to commercial have think how – towards to licensing you've is program hired just the go of a you – about the be

Richard MacPherson

place. Caldwell & was the Our is licensing program, resources all with Tim Curry on track Cassady necessary in of

Tim Quinlisk

changed and the Okay, what back if then went just, okay. competitors go years, your me business products me business nature about If rethink And model model. commoditized have Can of Rick, because help you back we the has overcapacity? Is the the dramatically. of could you their your looks okay, understand you two have think help like in you've sort forward as about business of from kind and also at move base sized operating of world? of in kind context expense either the new or based you of operational base point that or breakeven your a here on to generate success this might sizing of the business how that

Richard MacPherson

Sure.

the actually to further going offering development than So, against inherent, our to Tim, is getting to utilities forward compete having with at technology many just that point by a the in in of And run, utility our best so what the in introduced time market. forward technologies. the know, be now was to We own industry this utilities along too taking to to itself, our had and adoption very the our our that recognized possible company. of rather these The our were of technologies basis commodity that continues as the with house to recognized a ownership make guess our you startup creating approach installed development focused we ability and years position as of we that effective the however, patent it and our to our utilities that [indiscernible] and much offerings that on services overall to our utilizing of development have place. on of recognize long best operated adopted a small country the going the and adding the would I We deem investment was many, In technologies both continue across as to we process. the significant adoption. number and technology and the was without

are now or whether of situation a in in confident monetize very being in a not We where the process. we're to that we able adoption position the providers – feel

Our recognizable to is whether introduced to there's huge to the the value value they own. that, a provide failing on the main day, objective process use should through provider, but to that at the that us we technologies it of or But end the still shareholder be their the industry.

Tim Quinlisk

Okay. Rick, I'm on if sorry could. extension just a you little that

fully As and I of run perspective. think particularly you terms trying about understand that assuming the the customers a where are kind then I'm of the bottom that of of dropped in line profitability add from just road, – beyond point? And your And we and on sustaining given anything that business these you're at are as at is in that boilers sort additional to today, to you incremental of kind extensions rate current the you agreements the had a expansions where breakeven point mentioned, you kind down self this point? license the

Richard MacPherson

Yes.

Tim Quinlisk

or – where got model with to sort pretty business what a is incremental you've part of operationally? Yes here you're comfortable currently your

Richard MacPherson

we that the manpower point with the new have business We've huge place. hand. in add place, position comfortable right infrastructure are we in going we we a right so have are got where a breakeven We've line beyond with in costs, just reduced we of in amount our our that we're streamline, the can forward, we very We're now. the also in Yes. business, now cost

successful have the future robust from for through that required amount see today All under operate we is the point be financing of with that this front & bottom licensing our with have ability situation no much Caldwell line. significant and to view, Curry And in additional given of is of able inflection business to this the partners, business of be a us dropped will the being hand. as that Cassady huge in this acquired to we present we to point pretty company very and the we're in

Tim Quinlisk

great. Okay,

So I'll queue. you, Thank get Appreciate back Rick. it. into

Richard MacPherson

Thank you.

Operator

Feinberg a Feinberg from have Next we question Jeff from Investments.

Jeff Feinberg

much. you Difficulty] very Thank [Technical

Operator

up, please? Mr. is question breaking that you repeat Feinberg, your again line could

Richard MacPherson

Couldn’t hear you, Jeff.

Jeff Feinberg

Can you me hear now?

Richard MacPherson

Perfect.

Jeff Feinberg

range for you for a successful on resolution you. provide your technology please boiler of thank of values licensing basis? and/or Great, per Can licensing litigation

Richard MacPherson

portion the time for MEXC a on costs. to considerable that a model operating I our amount revenue with customer. the pretty say the can prefer first while process agreements of still much license of what is savings. Yes, But that going information they model could use optimization utility, can with preface to the it's millions I utilities, offset – to amount would those between it the to dollars that average process. provide at mirrors it agreement same of that to our a regards saves few bringing forward. by are efforts I licensing We've or that utility that to structured return that year completed do But saying so a without particular

that and client he for on whether take really the operator, will be that And the whether specific prefer likes operate that operate for I to that for a them. about would this So MEXC us than more the the not The they boiler any elect their to in at own system to or win company, same. or to results be license come time.

Jeff Feinberg

Okay. The their being confidence that basis, part law structured? you, firm of is a is contingency that representing on how the process, this in its evidencing

Richard MacPherson

to Caldwell for The onboard that us presented recent on arrangement firm They And was made it not optimistic are for rights a small of taken public has in have press and privileges if with we they nature. as release recent about been them very much are very that with They Cassady evidenced valuation. the something and between & what the and lot us very was a we strategic do going are win would in purposes. not they forward. thought large Curry

a I again, them there's that, would placed in guess at position time. great our deal but of confidence I So it leave by at this

Jeff Feinberg

Okay.

just We're just math, were conceptually, company of of a one about million of here? talking I mean, hundred million $XX I correctly, so thinking I the the market couple this thinking and am marketplace a opportunity. matter follow-up I'm mean, dollars and correctly. on you conceptual make these talking per million. sure, just get I’m boiler me to about about the we're the now the to understand $XX per Let of of If only even boilers. if $X.X savings missing cap final dynamics millions year market million anything about $XXX I per year to is

Richard MacPherson

we're realize a to bit math, I your initiative. Jeff, launched your the when I fault At any find can't forward can't in is that but stage would be it with for just kind we're early But of suggest math. going this find fault to that revenue. any me

Jeff Feinberg

Thank you much. very Okay.

Operator

And conference our like the over CEO I'd remarks. question-and-answer and for conclude turn that does to Company's President Richard today. closing back MacPherson, And the to session

Richard MacPherson

position first foremost reasonable the us folks, developing to been with period cost and grow. knew we effectively. we the its have want a proves now shareholders. be and that their the industry out Well shared to approach. adopted of by the technology technologies able the technologies that in them for investors were that through we remove company in and technology thank mercury developing should using utility Years monetize a to the investment that the majority to those We're we would at and company with and of those see patenting ability significant say time very company, much, ability back you a the that in been where value for at impact be to when long able have the ago adopted the of be and to effective founded I the come technology process and In being correct very time our much and effort industry of sorbent to placed had all shareholders be faith and of the the to assumption

Thank you. right now we you So what that forward I the But the much and that coming again help to the very the and for looking weeks to in and going of coming few thanks getting back complete look announcements forward picture to much have through proposition. we'll forward the weeks. next value recognize in interest month the on to look so to we I'm see additional

Operator

today. Thank your That concludes conference you for for our participation.